Changing patterns of work at older ages - IFS Report R192 Rowena Crawford Jonathan Cribb Heidi Karjalainen Laurence O'Brien - Institute For Fiscal ...
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lnstitute for Fiscal Studies IFS Report R192 Rowena Crawford Jonathan Cribb Heidi Karjalainen Laurence O’Brien Changing patterns of work at older ages
Changing patterns of work at older ages Rowena Crawford Jonathan Cribb Heidi Karjalainen Laurence O’Brien Copy-edited by Judith Payne Published by The Institute for Fiscal Studies 7 Ridgmount Street London WC1E 7AE +44 (0)20 7291 4800 mailbox@ifs.org.uk http://www.ifs.org.uk/ @TheIFS The Institute for Fiscal Studies, June 2021 ISBN 978-1-80103-045-8
2 Changing patterns of work at older ages Preface The authors are grateful for funding from the Centre for Ageing Better that enabled them to write this report. The Centre for Ageing Better is a charitable foundation, funded by the National Lottery Community Fund. Its vision is a society where everyone enjoys later life. Co-funding from the Centre for the Microeconomic Analysis of Public Policy (ES/T014334/1) at the Institute for Fiscal Studies is gratefully acknowledged. Data from the English Longitudinal Study of Ageing (ESLA) were supplied by the ESRC Data Archive. ELSA was developed by researchers based at University College London, the Institute for Fiscal Studies and the National Centre for Social Research, with funding provided by the US National Institute on Ageing and a consortium of UK government departments coordinated by the Office for National Statistics (ONS). The Labour Force Survey (LFS) data are Crown Copyright and are reproduced with the permission of the Controller of HMSO and the Queen’s Printer for Scotland. The LFS is produced by the Office for National Statistics and accessed through the ONS’s Secure Research Service. The authors would like to thank Emily Andrews, Carl Emmerson, Paul Johnson and members of the project advisory board for helpful feedback and comments. The authors would also like to thank Melanie Lührmann and Ija Trapeznikova for assistance with linking ELSA with the O*NET data, and Peter Spittal for assistance with ELSA life-history data.
3 Changing patterns of work at older ages
Contents
Executive summary.................................................................................................. 4
1. Introduction ...................................................................................................... 8
2. Movements into and out of paid work .......................................................... 16
2.1 Movements out of paid work ............................................................... 17
2.2 Movements out of unemployment ....................................................... 23
3. Movements between full-time and part-time work ..................................... 29
3.1 Older workers and part-time work ....................................................... 31
3.2 Hours satisfaction................................................................................. 32
3.3 Movements into part-time work ........................................................... 37
3.4 Part-time work in retirement pathways ................................................ 40
4. Changes in occupation ................................................................................... 45
4.1 Occupations and task content at older ages.......................................... 46
4.2 How common are changes in occupation year to year? ....................... 50
4.3 Who changes occupation? .................................................................... 51
4.4 Occupation changes as part of retirement pathways ............................ 55
5. Movements between employment and self-employment............................. 58
5.1 Older workers and self-employment .................................................... 60
5.2 Movements into self-employment........................................................ 61
5.3 Self-employment in retirement pathways ............................................ 64
6. Conclusion ....................................................................................................... 67
Appendix A. Data and methodology descriptions ............................................... 72
Appendix B. Additional results ............................................................................. 79
References ............................................................................................................... 814 Changing patterns of work at older ages Executive summary Longer working lives offer many benefits, but achieving these can pose challenges for individuals, employers and policymakers. In order to support people in their 50s and 60s to remain in paid work for longer, it is imperative that we have a good picture of what paid work looks like at older ages, and how that might evolve in future. The desired working patterns of older workers – in terms of their hours of work, the form of their employment or the tasks they undertake at work – may be quite different from those of middle-aged or younger adults. An ageing population and higher employment rates for people in their 50s and 60s mean that patterns of work of older workers are an increasingly important issue for the country as a whole. Indeed, in 2019, around 10 million or 61% of 50- to 69- year-olds were in paid work, meaning that this age group comprises almost a third (31%) of the workforce in the UK, up from just 21% in 1992. In this report, we provide fresh evidence on the nature of paid work at older ages, how employment patterns differ for people in different circumstances and how the situation is changing over time. In particular, we examine in depth the transitions that older workers make, both into and out of work and between different types of employment in the run-up to retirement. Having provided a comprehensive picture of working life for people in their 50s and 60s, we then examine the implications of our findings for some key issues facing older workers in the labour market in the coming years, including which groups might be of particular concern in the wake of the COVID-19 pandemic. These issues are important not only for the individuals themselves, but for policymakers who are seeking to encourage people into longer and more fulfilling working lives, for employers who would benefit from employing them, and for civil society organisations and government agencies interested in assisting older people in finding productive work that allows them to balance their work and personal lives. The Institute for Fiscal Studies, June 2021
5 Changing patterns of work at older ages
Key findings
1 There are likely to be significant challenges for many people in
their 50s and 60s finding new jobs after the end of the furlough
scheme. Older workers, particularly those aged over 65, have been
more likely to be furloughed than middle-aged workers – at the end of
April 2021, 14% of workers over 65 were furloughed, compared with
10% of those aged 40–49. There may well be significant numbers of
older jobseekers in coming months.
2 There are a number of reasons that finding new work may be
challenging for people in their 50s and 60s. Most older workers do
not have much recent experience of searching for work: Over two-
thirds (69%) of 55-year-old workers have been with their employer for
more than five years. Only 4% of older workers typically change
employer in a single year. Older workers are also less likely than
younger workers to change occupation, which may be necessary if
vacancies are not available in their current line of work – and this is
something that could become more prevalent as the economy adjusts
to new patterns of working and spending after the pandemic.
3 Older jobseekers from lower socio-economic groups are more
likely to struggle to find new work after a period of
unemployment. Those with lower levels of education, the long-term
unemployed and women are particularly less likely to re-enter work at
older ages after becoming unemployed.
4 Significant numbers of older workers would benefit from lower
hours of work and more flexibility. 16% of 50- to 69-year-olds in
employment would like to work fewer hours, up from around 14% prior
to the Great Recession. That is an increase of around 230,000 people.
People in their 60s, those who own their home outright, those
reporting a limiting health condition, and those who have been in their
current job for longer are particularly likely to want to work less.
The Institute for Fiscal Studies, June 20216 Changing patterns of work at older ages
5 For some older workers, part-time work acts as a way of making
a gradual transition towards retirement. Moving into part-time work
at older ages is more common amongst people with higher levels of
education and living in less deprived areas – which could point to
differences in access to part-time work or to differences in financial
constraints that affect people’s ability to reduce their hours.
6 Only 9% of older employees become self-employed in the run-up
to retirement. Transitions into self-employment are more likely among
men and those with a history of self-employment earlier in life. Given
self-employment is a form of flexible work where people have greater
autonomy over their hours, policymakers should consider whether
older workers could be encouraged to view the option of being self-
employed as a way of extending their working life.
7 Half of full-time workers move straight into non-working
retirement, without any intermediate steps. One particularly
important factor predicting moving straight from full-time work to
retirement is membership of a defined benefit pension – those with
such a pension are 13 percentage points (ppts) more likely to go
straight from full-time work to retirement than those without. These
pensions are particularly common in the public sector. As the reforms
to public sector pension arrangements have led to a reduction in the
financial disincentives associated with working shorter hours before
retirement, public sector employers should consider how best to
support employees who want to move gradually into retirement.
8 There is a small but important section of the older workforce who
would like to work more hours. Around 7% of older workers in 2019
wanted to work more hours per week, higher than the 5% seen in
2007 before the financial crisis. That is an increase of around 190,000
individuals. They tend to have less secure work arrangements, such
as being on a temporary employment contract. They are more likely to
have low earnings and shorter job tenures, be in their 50s rather than
their 60s, be men and be working part-time. The self-employed are
also more likely to want to work more hours, highlighting that the
flexibility of self-employment also entails risks.
The Institute for Fiscal Studies, June 20217 Changing patterns of work at older ages
9 The position in the labour market of people in their 50s and 60s
with long-standing health conditions requires special attention.
Around 49% of people (and 39% of workers) aged 50–69 report a
long-standing health problem. Older workers with long-term and work-
limiting health problems are 5 ppts less likely to be in paid work in a
year’s time than are similar workers without such a health problem.
Those in work with a health problem are also significantly more likely
to retire via a period out of the labour market.
10 Some people in their 50s and 60s with long-standing health
problems may have preferred, and been able, to stay in work if
they had more flexibility or better support. Indeed, those with a
health problem are around 4 ppts more likely to want shorter hours
than those without a health problem.
11 The working lives of men and women who are approaching
retirement over the next decade will be very different from those
of people who did so over the last decade. In future, those
approaching retirement are increasingly likely to be in more stressful
and more cognitively demanding jobs. Currently, older workers in
these sorts of jobs are significantly more likely to want to work shorter
hours but are actually less likely to move into part-time roles. This
suggests that making sure appropriate flexible work options are
available to this group should be a particular priority in the years to
come.
The Institute for Fiscal Studies, June 20218 Changing patterns of work at older ages 1. Introduction One of the greatest successes of the last century is the increase in life expectancy at older ages enjoyed by many around the world. A man reaching age 60 in the UK today can expect to live for another 25 years, over a third longer than was the case 40 years ago. In response to this increased longevity, the government has been seeking to encourage individuals to remain in paid work for longer – perhaps most obviously by increasing the age at which individuals can start to receive the state pension. In addition to helping the government’s financial position, longer working lives also make it easier for individuals to provide financially for their own retirement, and there can be other wider benefits – such as to health and social participation – for many from staying in work. Longer working lives provide benefits but also challenges for individuals, employers and policymakers. The type of work desired by older workers may well be different from what middle-aged or younger people want – for example, in terms of their hours of work, the form of their employment or the tasks they undertake at work. This could arise due to changes in the health of older workers affecting the work that they are able or want to do, or simply due to changing preferences over time. Older workers may also have other demands on their time – for example, caring for a spouse or grandchildren. The extent to which older workers are able to continue in paid work, and to be satisfied in their situation, will therefore depend on the extent to which they are able to find employment that suits their needs and preferences. Given these differences between older and younger individuals, in order for policymakers and employers to be able to support older workers to have longer working lives, it is imperative that we have a good picture of what paid work looks like at older ages. In particular, we need to be conscious of the fact that this could be quite a changing picture over time, with increasing numbers of people working into their mid 60s, late 60s and 70s, and many individuals – particularly women – reaching older ages with very different labour market histories from those in previous generations. Policy needs to be based on up-to-date evidence on the situation of older workers in the labour market. The Institute for Fiscal Studies, June 2021
9 Changing patterns of work at older ages That is the key aim of this report. We seek to understand more about the nature of work at older ages, how employment patterns differ for people in different circumstances and how the situation is changing over time. We do this in order to help identify which groups may find it easier and harder to adjust to higher state pension ages and longer working lives. In this context, it is particularly important to examine how people transition from work into their retirement. The traditional move from a full-time job into a non-working retirement is still the most common pathway. But there are many other patterns of work at older ages. These include movements: into and out of paid work; between jobs with different employers and in different occupations; between full- and part-time work; and between employment and self-employment. These patterns of work in the run-up to retirement give at least some people the opportunity to balance their work and personal lives in different ways. But they can also present challenges where changes are made involuntarily, or where particular groups are not easily able to change their work in the way that they would like. We shed light on these changes in work activities and different ‘pathways’ into retirement, how common they are amongst different groups and how their prevalence has changed over time. All of the analysis in this report examines patterns in labour market activity among older adults up to the eve of the COVID-19 pandemic. This is because the immense shock to the labour market over the past year, with almost 9 million people furloughed at the start of May 2020 and almost 3.5 million still furloughed at the end of April 2021 (HMRC, 2021), means that the effects of the pandemic could obscure the important long-running pre-pandemic trends which are important for understanding the patterns of work for people in their 50s and 60s. Evidence on the trends and other patterns observed prior to the pandemic will also shed light on the groups for whom economic adjustments post pandemic might be particularly difficult, and throughout the report we highlight cases where this may be particularly concerning. The analysis in this report uses data from two long-running micro-datasets: the UK- wide Labour Force Survey (LFS) and the English Longitudinal Study of Ageing (ELSA). As a large and nationally representative dataset with detailed information on labour market issues, the LFS is used to understand in detail the economic activity of people aged 50–69. In addition, because it follows people for up to five consecutive quarters, we use it to understand transitions into and out of paid work and between different employers and forms of work over the course of a year. The analysis using the LFS is then supplemented using ELSA, which is a longitudinal The Institute for Fiscal Studies, June 2021
10 Changing patterns of work at older ages
study that has surveyed a representative sample of those aged 50 and over in
England every two years since 2002 – allowing us to observe the labour market
activity of some individuals over a full 16 years. This is particularly important as it
allows us to observe a longer view of pathways between work and retirement at
older ages. More details on the data used in this report, and the methodological
approaches taken, are available in Appendix A.
It is important to provide some context for the analysis in the main chapters of this
report. Using the LFS, in Figure 1.1 we document the share of people of different
ages who are in paid work (either as permanent employees, temporary employees or
self-employed workers), the share who are unemployed and the share who are not
in the labour force, splitting this up by their main activity (such as retired, caring for
family, or long-term sick).
Figure 1.1. Share of individuals in different types of economic activity, by
age (2017–19)
100
80
Percentage of population
60
40
20
0
20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68
Age
Permanently employed Temporarily employed
Self-employed Unemployed
Retired Long-term sick
Full-time education Caring
Other inactive
Source: Labour Force Survey.
The Institute for Fiscal Studies, June 202111 Changing patterns of work at older ages
The figure shows the share of individuals in these different forms of economic
activity in 2017–19. Unsurprisingly, the share of individuals in paid work falls after
approximately age 50: around five-in-six (83% of) 50-year-olds are in paid work,
compared with under one-in-six (16% of) 69-year-olds. The fall in the proportion of
people in work is relatively gradual, although this does get steeper after age 60 and
in particular around state pension age: for example, about 41% of people are in paid
work at age 64, but only 30% are still in work at 65. The main reason for the fall in
the proportion of people in work is an increase in people who are retired or are out
of work and reporting long-term health problems.
Figure 1.2. Share of 50- to 69-year-olds in different types of economic
activity, by year
100
Percentage of 50- to 69-year-olds
80
60
40
20
0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Year
Permanently employed Temporarily employed
Self-employed Unemployed
Retired Long-term sick
Full-time education Caring
Other inactive
Source: Labour Force Survey.
However, Figure 1.2 shows that the share of 50- to 69-year-olds in paid work has
increased noticeably over the last 25 years, from around 46% in 1994 to just over
61% by 2019. This increase has mainly come about due to a reduction in the share
who are retired or out of work and reporting long-term health problems. The
The Institute for Fiscal Studies, June 202112 Changing patterns of work at older ages
increase has occurred at the same time as several government policies trying to
encourage people to have longer working lives – for example, increases in the state
pension age (Amin-Smith and Crawford, 2018), reforms to incapacity benefits
(Banks, Blundell and Emmerson, 2015) and the removal of default or mandatory
retirement ages in 2011.1
It is worth noting, though, that the employment rate of older workers experienced a
large decrease during the 1980s, particularly for men. This means that, while recent
years have seen an increase, the employment rate of men in their early 60s was still
over 15 percentage points (ppts) lower in 2019 than in 1975 (Banks, Emmerson and
Tetlow, 2017; Cominetti, 2021). This suggests that, despite recent successes, there
is still scope for more people to stay in the labour market until older ages. We also
know that the productive potential of people in their 50s and 60s (both in and out of
work) is higher today as people in these age groups are much healthier now than
they were in the mid 1970s (Banks, Emmerson and Tetlow, 2017).
Policymakers wanting to boost older-age employment rates require a proper
understanding of the movements behind these headline trends. In this report, we
therefore examine labour market activity at older ages in more detail, in particular
focusing on changes in work activities.
At first sight, the labour market at older ages appears to exhibit much less turnover
than at younger ages. Figure 1.3 describes the distribution of job tenure among
those in paid work at different ages. The proportion of workers who have joined
their job in the past year, or the past five years, is much lower at older ages. At age
55, over two-thirds (69%) of workers have been with their employer for at least five
years. Since workers can join a job either directly from another job or after a spell
out of work, this pattern has two possible explanations (or most likely a
combination of the two). The first possibility is that older workers are less likely to
switch jobs than younger workers, while the second is that older workers are less
likely to start working again after a period out of the labour market than younger
workers. We examine both of these questions in this report.
1
See https://www.gov.uk/government/news/default-retirement-age-to-end-this-year.
The Institute for Fiscal Studies, June 202113 Changing patterns of work at older ages
Figure 1.3. Share of workers with different lengths of job tenure, by age
100
80
Percentage of workers
60
40
20
0
20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68
Age
Job tenure < 1 year Job tenure 1–5 years Job tenure at least 5 years
Note: Job tenure refers to the length of time a worker has been working for their current
employer or has been (continuously) self-employed for.
Source: Labour Force Survey 2017–19.
Figure 1.4 shows that among those aged 50–69 who were in paid work over the
period 2012–19, 5% of them were retired a year later, while 1% were unemployed
and 2% were out of work but neither retired nor actively seeking work. Among
those aged 50–69 who were observed to be unemployed, 35% were still
unemployed a year later, while 31% were in paid work, 11% were retired and 24%
were otherwise not in paid work. In Chapter 2, we examine these patterns in detail,
including which types of older workers are more likely to leave employment, and
which types of older jobseekers are less likely to find a job again after becoming
unemployed.
Figure 1.5 illustrates the prevalence of various employment changes among older
workers who remain in paid work over the course of a year. Around 4% change
employer. Of course, people can change their work arrangements (such as their
hours, or even their occupation) without changing employer, and they can change
employer without changing their broad work arrangements.
The Institute for Fiscal Studies, June 202114 Changing patterns of work at older ages
Figure 1.4. Movements into and out of work among those aged 50–69 (2012–19)
100
90
Percentage of individuals
80
70
at end of year
60
50
40
30
20
10
0
Employed at start of year Unemployed at start of year
Employed Retired Unemployed Other out of work
Note: Sample includes those employed (left four bars) or unemployed (right four bars) in
wave 1. Bars show the share who are employed, retired, unemployed, or otherwise out of
work in wave 5.
Source: Labour Force Survey.
Among older full-time workers, around 8% had moved into part-time work by a
year later. In Chapter 3, we look particularly at the hours of work that people
undertake at older ages, the extent to which people want to work more or fewer
hours, and whether people move into part-time work as a pathway between full-
time work and retirement.
Around 3% of older workers report having changed their occupation over the
course of a year. In Chapter 4, we examine these transitions in more detail, in
particular which types of older workers change occupation, and whether people
choose to move into occupations that are in some sense ‘less demanding’ as they
approach retirement.
Among older employees, around 2% moved into self-employment by a year later.
Chapter 5 examines the issue of self-employment, which is an important form of
economic activity for older workers, and the types of people who switch between
employment and self-employment in the run-up to retirement.
The Institute for Fiscal Studies, June 202115 Changing patterns of work at older ages
Figure 1.5. Movements within employment among those aged 50–69 (2012–19)
9
Percentage making conditional switch
8
7
6
5
4
3
2
1
0
FT-PT Empl-Selfemp Switch employer Switch occupation Switch industry
Note: The FT-PT bar shows the share of full-time workers in wave 1 who work part-time in
wave 5 (conditional on still being in work); the Empl-Selfemp bar shows the share of
employees who are self-employed in wave 5 (conditional on still being in work); the other
three bars show the share of workers who report having switched employer, occupation or
industry over the past 12 months (conditional on working 12 months prior). Full-time work is
defined as working 30 or more hours per week, and part-time work as working fewer hours
than that.
Source: Labour Force Survey.
Throughout all the chapters, we highlight the implications of our key findings for
policymakers, employers and those interested in facilitating longer, fulfilling and
productive working lives for older workers. In Chapter 6, we draw together our key
findings from all the chapters, and discuss in particular where we think that there
are likely to be difficulties facing the older population, or particular parts of the
older population.
The Institute for Fiscal Studies, June 202116 Changing patterns of work at older ages
2. Movements into and
out of paid work
While employment rates fall after the age of 50, and retirement rates rise, it is not
the case that the only transitions people in their 50s and 60s make are from
employment into retirement. Many older workers make other transitions, such as
from paid work into unemployment or into economic inactivity due to poor health.
And unemployed people often move back into paid work after a period searching
for work.
To understand this behaviour more fully, in this chapter, we examine transitions
into and out of work over the course of a year, using the Labour Force Survey. We
find that workers are more likely to leave work as they get older, principally into
retirement, and that older unemployed individuals are less likely to find work again
than similar younger individuals. We also examine which characteristics are
associated with a higher prevalence of making these transitions, and discuss
potential implications for policymakers, in particular in the wake of the COVID-19
pandemic.
Key findings
1 Older workers are more likely to leave paid work over the course of a
year than younger workers, principally into retirement. Older
jobseekers are also less likely to find a job than younger ones.
2 Women are almost 1 percentage point more likely to leave paid work
at ages 50–69 than men with otherwise similar characteristics, and are
around 4 ppts less likely to move from unemployment back into work.
3 Non-white older workers are 2 ppts less likely to stay in paid work at
older ages than white older workers with otherwise similar
The Institute for Fiscal Studies, June 202117 Changing patterns of work at older ages
characteristics, while immigrants are 2.5 ppts more likely to stay in
paid work than workers born in the UK as they are less likely to retire.
4 Workers reporting a long-standing and work-limiting health problem
are almost 5 ppts less likely to still be in work in a year’s time
compared with workers with otherwise similar characteristics but who
do not report such a health problem. Jobseekers with a long-standing
health problem also re-enter work at lower rates than those without
such a health problem.
5 Compared with permanent employees, self-employed workers with
otherwise similar characteristics are almost 2 ppts more likely to stay
in paid work at older ages. Temporary employees are over 8 ppts less
likely to stay in paid work than permanent employees. Relatedly, older
workers who recently started their job are also more likely to be out of
work in 12 months’ time than older workers with longer job tenure.
6 Part-time work does seem to be a ‘bridge’ into retirement for some
workers, as those working fewer than 30 hours per week are 3 ppts
more likely to leave work and go into retirement than full-time workers
with otherwise similar characteristics.
7 More-educated older jobseekers are 5 ppts more likely to have found
work one year later than otherwise-similar jobseekers with lower levels
of formal education.
8 Older jobseekers who have been out of work for 6–12 months are
around 17 ppts less likely to be in work one year later than otherwise-
similar jobseekers who have moved out of paid work within the last 6
months, while those who have been out of work for over two years are
over 30 ppts less likely to be in work one year later.
2.1 Movements out of paid work
We start by documenting how common it is for workers to retire from work,
become unemployed or otherwise move out of work, and how this differs by age.
This is shown in Figure 2.1 for two different time periods: 2012–19 (the years
The Institute for Fiscal Studies, June 202118 Changing patterns of work at older ages
running up to the pandemic) and 2002–07 (the years running up to the Great
Recession). The likelihood that a worker retires over the course of a year
unsurprisingly increases with age. Historically, there were spikes in retirement over
the next year for those aged 59 and those aged 64 – for example, in the mid 2000s
over 30% of 64-year-olds in work were retired a year later. However, alongside the
female state pension age increasing from 60 to 65 between 2010 and 2018 and the
state pension age for both men and women increasing from 65 to 66 between 2018
and 2020, these spikes in retirement at particular ages have become much less
pronounced.
Figure 2.1. Percentage of workers moving into retirement, unemployment or ‘other out
of work’ within a year, by age
35
2012–19 2002–07
30
Percentage of workers
25
Retired
20
15
10
Unemployed
Other out of work
5
0
35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69
Age at start of year
Note: For those who are working in wave 1, the graph shows the percentage who are retired,
unemployed or otherwise out of work in wave 5. Samples are restricted to those who
respond to wave 1 between 2012q3 and 2019q1 (2012–19) and between 2002q2 and
2006q4 (2002–07).
Source: Labour Force Survey.
The share of workers becoming unemployed is fairly low, and similar across all
ages and time periods at around 1–2%. The proportion of workers leaving work
within the next year but classing themselves then neither as retired nor unemployed
(typically such individuals report themselves to be either looking after family or
long-term sick or disabled) increases slightly with age, but this has been less
common over the latter part of the 2010s than in the earlier period.
The Institute for Fiscal Studies, June 202119 Changing patterns of work at older ages What other characteristics, apart from age, affect the probability of workers leaving employment? To answer this question, we present the results from a multinomial logit regression in Figure 2.2. These results show, for a sample of people aged 50– 69 between 2012 and 2019, the association between their initial individual and job characteristics, and the probability of their being employed, unemployed, retired or otherwise out of work one year later. In this, and in similar analyses in later chapters, we examine associations between a large range of characteristics and the transition probabilities, including: sex, age, education, marital status, ethnicity, housing tenure, job tenure, health, hours of work, earnings and the task content of the job. We measure the ‘task content’ of each occupation using the O*NET database, which provides a rich set of variables for each occupation, describing the type of work performed, the general attributes of workers in these occupations, and typical work settings. Following Ameriks et al. (2020) and Jolivet and Postel-Vinay (2020), we use principal component analysis to synthesise information in this database into the ‘manual’, ‘interpersonal’, ‘cognitive’ and ‘stressfulness’ task content of each occupation, where each measure is normalised to lie between 0 and 1. More details on the method can be found in Appendix A. As examples of the kind of task content scores different occupations are assigned, chief executives and senior officials have a manual task score of 0.41, interpersonal score of 0.65, cognitive score of 0.96 and stressfulness score of 0.89. In comparison, carpenters and joiners have a manual task score of 0.75, interpersonal score of 0.47, cognitive score of 0.52 and stressfulness score of 0.59. A list of all variables can be found in Table DA.1 of the data appendix. Note that the effect of each characteristic is calculated assuming that all the other characteristics are held constant. For example, this means that when looking at differences between immigrants and UK-born individuals, it controls for other differences that may be important, such as education, sex or ethnicity. In this section, as well as in the rest of the report, we also repeat the estimation separately for 50- to 59-year-olds and for 60- to 69-year-olds, and highlight any significant differences between the two age groups. The Institute for Fiscal Studies, June 2021
20 Changing patterns of work at older ages
Figure 2.2. Characteristics associated with leaving work among 50- to 69-
year-olds
Female
Not white
Immigrant
Higher education
A levels
Couple
Mortgage
Renter
Health problem
Temporarily employed
Self-employed
Full-time
Log hourly earnings
Job tenure < 1 year
Job tenure 1–5 years
Manual task score
Interpersonal task score
Cognitive task score
Stressfulness task score
-10 -8 -6 -4 -2 0 2 4
Percentage point effect
Employed Retired Unemployed Other out of work
Note: Average marginal effects from a multinomial logit regression. The sample is 50- to 69-
year-olds who join wave 1 between 2012q3 and 2019q1 and who are working at that time.
The outcome is whether they are employed, retired, unemployed, or otherwise out of work in
wave 5. The independent variables are individual characteristics in wave 1. Solid bars
indicate the effects are statistically significantly different from zero at the 10% significance
level. See Table DA.1 in the data appendix for a full list of controls and base covariates.
Source: Labour Force Survey.
The Institute for Fiscal Studies, June 202121 Changing patterns of work at older ages
Figure 2.2 indicates that many characteristics are associated with changes in
transition probabilities for those who are in work:
▪ Sex: Women in paid work are estimated to be 0.9 ppts less likely to still be in
paid work in a year’s time compared with men – being more likely to retire or
otherwise move out of paid work but not report themselves as unemployed. In
particular, women are much more likely to go into caring (looking after the
family and home) than men are. This relationship of women in paid work being
less likely to still be in work a year later has, however, diminished over time,
and particularly given that the state pension ages of men and women have been
equalised since December 2018, this difference may have faded further.
▪ Ethnicity also seems to play a role. Non-whites are around 2 ppts less likely to
still be working one year later than whites, and are more likely to move into
‘other out of work’.2 Immigrants, on the other hand, are 2.5 ppts more likely to
still be working one year later than those born in the UK, and are less likely to
move into retirement. The magnitude of this effect is larger for those in their
60s than those in their 50s. An important direction for future research is to
understand more about the drivers of these patterns, the extent to which they are
a cause for concern, and how policy could address these differences. For
example, these differences could arise due to differences in financial constraints
on retirement (either because of different spending needs or because some
groups, such as immigrants who have spent less time in the UK, may have
lower pension wealth), or due to different retirement preferences, or due to
different opportunities in the labour market for different groups.
▪ Education: Education does not seem to have a significant association among
50- to 69-year-olds as a whole. However, when we restrict out focus to workers
in their 50s, we find that those with higher education are 0.7 ppts more likely to
retire than those with GCSE education or lower. Early retirement therefore
seems to be more of an option for more educated workers, potentially because
they have built up more pension wealth.
▪ Housing tenure: People who own their home outright are around 2 ppts less
likely to still be in work and around 2.5 ppts more likely to be retired one year
2
Ideally, we would like to analyse differences for more granular ethnic minorities. Regrettably, we
are unable to do this in this report due to limited sample sizes.
The Institute for Fiscal Studies, June 202122 Changing patterns of work at older ages
later than renters and owner-occupiers with a mortgage. They are also 0.3–0.4
ppts less likely to have become unemployed. This could point to a potential
issue in the future – if fewer people are reaching retirement owning their home
outright, then they may have to remain in paid work for longer.
▪ Health: Those reporting a long-standing and work-limiting health problem are
almost 5 ppts less likely to still be in work a year later compared with those not
reporting such a health problem. They are not significantly more likely to retire
though; rather, they are more likely to become unemployed or to go into ‘other
out of work’. This suggests that health problems are a barrier to longer working
lives, and is consistent with the rising share of people who are out of work due
to long-term health problems with age found in Figure 1.1. If people are to be
encouraged to remain in paid work for longer, it is crucial that policymakers
and employers consider how best to make work possible for those who might
want to work but are struggling with health problems.
▪ Employment type: The type of job or employment contract that someone has is
also associated with different probabilities of leaving work in the next year. For
example, compared with permanent employees, self-employed workers are
almost 2 ppts more likely to still be working a year later, mainly because they
are less likely to retire or to become unemployed. This suggests that self-
employment can be a path to a longer working life for some individuals. To
build on this, in Chapter 5, we explore which types of workers move into self-
employment at older ages. On the other hand, temporary employees are over 8
ppts less likely to still be in work a year later – this effect is particularly driven
by those in their 60s. Just under half of this difference can be explained by a
higher probability of retiring, suggesting that some workers might be using
temporary employment at the end of their careers as a bridge to retirement (or
less benignly could suggest that those moving out of temporary employment
retire as they see little prospect of a move into paid work that they would like).
Being more likely to move out of work when a temporary employee is not only
a feature of older workers, though it is more likely for older workers. Being a
temporary employee aged 35–49 increases the probability of subsequently
leaving work by 4 ppts compared with being permanently employed, while the
increase is 8 ppts for 50- to 69-year-olds. Older temporary employees are also
around 2 ppts more likely to become unemployed and 2.5 ppts more likely to go
into ‘other out of work’ than permanent employees, indicating that temporary
The Institute for Fiscal Studies, June 202123 Changing patterns of work at older ages
employment could be indicative of some older individuals finding it difficult to
find more stable employment in the years leading up to retirement.
▪ Job tenure: Related to the findings on employment type, we find older workers
with a job tenure of less than one year are around 2 ppts less likely to still be in
work a year later compared with those who have been with their current
employer for over five years, as they are more likely to become unemployed or
to go into ‘other out of work’.
▪ Hours of work: Part-time workers are around 3 ppts less likely to still be in
work a year later than full-time workers, mainly because they are more likely to
go into retirement. This would be consistent with workers moving into part-
time work (fewer than 30 hours per week) for a short time before retiring,
something that we explore in more detail when looking at long-run transitions
into retirement via part-time work in Chapter 3.
▪ Task content: Here, some common perceptions are not borne out in the data.
For example, those with more manual jobs are no more likely to retire or
otherwise move out of work (if anything, they are less likely to become
unemployed). Thus the perception that people in manual work have to leave
work at younger ages because of the physical demands of the work is not
supported by this evidence. Those with more stressful jobs are also less likely
to retire and less likely to move out of work and not class themselves as
unemployed. It is those in jobs involving more interpersonal or cognitive tasks
who have a lower probability of staying in work.
2.2 Movements out of unemployment
It is also important to examine how likely people in their 50s and 60s are to move
out of unemployment – in particular, how likely they are to re-find work –
particularly in the context of relatively high rates of furloughing of older workers
during 2020 and early 2021: at the end of April 2021, 14% of workers over 65 were
furloughed, compared with 10% of those aged 40–49 (HMRC, 2021). We therefore
now turn to examining the subsequent economic activity of older unemployed
individuals: the probability that they become employed, or retired, or that they
remain unemployed, or that they remain out of work but no longer report
themselves to be unemployed a year later, and the characteristics associated with
those different transitions.
The Institute for Fiscal Studies, June 202124 Changing patterns of work at older ages
Figure 2.3. Share of unemployed moving into employment, retirement, or
‘other out of work’, or remaining unemployed, over the course of a year, by
age
100
90
Percentage of unemployed people
80
70
Retired
60
Employed
50
Unemployed
40
30
20
Other out of work
10
0
35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69
Age at start of year
Note: For those who are unemployed in wave 1, the graph shows the percentage who are
employed, retired, unemployed, or otherwise out of work in wave 5. Points with fewer than 10
people are suppressed.
Source: Labour Force Survey.
In Figure 2.3, we plot, for unemployed people aged 35–69 between 2012 and 2019,
the proportions who make different transitions over the following year. Most
strikingly, we see that the proportion of unemployed people who are employed a
year later declines significantly with age. For unemployed individuals in their mid
to late 30s, around 45–50% of them were in paid work one year later, while the rate
was just 25–30% for those in their late 50s. In part this is driven by more longer-
term unemployment among older workers (who generally find it harder to find new
work) – in 2019, 37% of 50- to 69-year-old jobseekers had been unemployed for at
least a year, compared with 33% of 35- to 49-year-old jobseekers. In addition, a
recent report by the Resolution Foundation found that over the period 1998–2020,
62% of newly unemployed people aged 50 or over returned to work within six
months, compared with 74% among those aged 16–29 and 72% among those aged
30–49 (Cominetti, 2021).
The proportion of unemployed individuals who are still unemployed one year later
does not vary in a clear way with age; rather, unemployed people are more likely to
go into retirement or ‘other out of work’ as they get older. These trends are still true
The Institute for Fiscal Studies, June 202125 Changing patterns of work at older ages
after controlling for many other characteristics, such as the education level of the
individual, and the length of time they have been unemployed for.
The fact that the older unemployed are less likely to find jobs than younger
unemployed people means that older individuals are more vulnerable to long-term
spells out of the labour market after losing their jobs. This is especially worrying in
the current circumstances: recent analysis published by the Office for National
Statistics (2021) suggests that around 1.3 million over-50s were on furlough in
early 2021. 30% of these employees think there is a 50% chance or higher that they
will lose their job when the scheme ends. While there is appropriately a lot of
policy focus on the youngest adults, the risk of long-term unemployment among
older jobseekers implies that there should also be particular attention paid to the
challenges facing older jobseekers. Of course, age is not the only characteristic
associated with the likelihood of a jobseeker finding employment. Figure 2.4
presents results from a similar multinomial logit regression to Figure 2.2, restricting
the sample to those who are unemployed when they first appear in the LFS.3
We find that there are important associations between the following characteristics
and the probabilities of making different transitions:
▪ Sex: Unemployed older women are nearly 4 ppts less likely to be in work one
year later than similar older men. This is not because they are more likely to
remain in unemployment; if anything, they are also less likely to be
unemployed one year later. Rather, they are nearly 5 ppts more likely to be in
‘other out of work’, suggesting weaker attachment to the labour force.
▪ Education: Whereas education did not have a significant effect on the
probability of staying in work, it does seem to matter for the likelihood of
finding work. Those with some form of higher education are around 5 ppts
more likely to be in work a year later compared with those whose highest
qualifications are GCSEs or lower. This is principally due to the fact that
unemployed individuals with higher education are less likely to end up in ‘other
out of work’.
3
A slightly different set of variables are controlled for since we do not observe job tenure, task
content of occupation, hours of work, and so forth for those individuals who are unemployed.
However, for those variables that are observed for both employed and unemployed people (such as
sex, age and education), we control for the same variables, and in addition we examine the
association between length of time unemployed and the probability of leaving unemployment.
The Institute for Fiscal Studies, June 202126 Changing patterns of work at older ages
Figure 2.4. Characteristics associated with leaving unemployment among
50- to 69-year-olds
Female
Not white
Immigrant
Higher education
A levels
Couple
Mortgage
Renter
Health problem
3–6 months since last job
6–12 months since last job
1–2 years since last job
2–3 years since last job
3–4 years since last job
4–5 years since last job
5+ years since last job
-40 -30 -20 -10 0 10 20 30 40
Percentage point effect
Employed Retired Unemployed Other out of work
Note: Average marginal effects from a multinomial logit regression. The sample is 50- to 69-
year-olds who join wave 1 between 2012q3 and 2019q1 and who are unemployed in wave 1.
The outcome is whether they are employed, retired, unemployed, or otherwise out of work in
wave 5. The independent variables are individual characteristics in wave 1. Solid bars
indicate the effects are statistically significantly different from zero at the 10% significance
level. See Table DA.2 in the data appendix for a full list of controls and base covariates.
Source: Labour Force Survey.
The Institute for Fiscal Studies, June 202127 Changing patterns of work at older ages
▪ Health: Those with a long-standing health problem are almost 6 ppts less likely
to be in work a year later, and over 5 ppts less likely to be retired, compared
with similar jobseekers not reporting such a health problem. Instead, they are
around 13 ppts more likely to be in ‘other out of work’, suggesting that these
individuals also particularly struggle to find a job, and often leave the labour
force altogether in response. Repeating this analysis separately for 50- to 59-
year-olds and 60- to 69-year-olds, we find that this effect is driven by those in
their 50s, indicating that these ages could potentially benefit more from extra
support.
▪ Length of time unemployed: The length of the unemployment spell matters
hugely for how likely older jobseekers are to enter employment. Those who
have already been out of work for 6–12 months are around 17 ppts less likely to
be in work one year later than someone who has been out of work for less than
6 months, while those who have already been out of work for over two years
are over 30 ppts less likely to be in work one year later. This supports evidence
from other research that individuals in long-term unemployment are especially
likely to need support to find a job, particularly given the individual costs borne
by the long-term unemployed (Nichols, Mitchell and Lindner, 2013; Mueller,
Spinnewijn and Topa, 2021).
There are also some characteristics that are not (statistically) significantly
associated with the likelihood of an unemployed older individual entering work. For
example, the probability that an unemployed non-white person enters work is not
statistically different from the probability for an otherwise-similar white person,
although there may of course be different effects between more disaggregated
ethnic groups. Similarly, we do not see strong evidence that the probability of
entering employment is different for immigrants than for those born in the UK.
In summary, women, those with lower levels of education, those with health
problems and the long-term unemployed are particularly less likely to re-enter work
at older ages after becoming unemployed. And older unemployed individuals are
much less likely to move back into paid work than younger unemployed
individuals. As emphasised earlier, these groups may be particularly vulnerable if
there is an unemployment spike after the end of the furlough scheme. This is
important for people in their 50s and 60s, not only for their current circumstances,
but for their future resources too, as the last few years of work before retirement can
be crucial for building up retirement savings (Crépon et al., 2013). It has also been
The Institute for Fiscal Studies, June 202128 Changing patterns of work at older ages shown that job loss at older ages and involuntary retirement have negative effects on physical and mental health (Gallo et al., 2000; Mandal and Roe, 2008; Riumallo- Herl et al., 2014). Policymakers should therefore pay particular attention to the challenges facing older workers who lose their jobs as the furlough scheme is wound down, which is scheduled to occur over Summer 2021. The Institute for Fiscal Studies, June 2021
29 Changing patterns of work at older ages 3. Movements between full-time and part- time work Part-time work is a prevalent form of work among older workers, especially women, and can offer valuable flexibility for those in later parts of their career. But hours of work, and satisfaction with them, vary across the population. For some people, part-time work brings them earnings while balancing other responsibilities in their personal or family life. Whereas for others, part-time work does not provide enough income to meet their financial needs. Careful analysis of people’s hours of work, satisfaction with their hours and transitions between different hours of work is important for understanding later-life economic activity. In this chapter, we show how the proportion of workers in part-time work changes with age, and the extent to which older workers are satisfied with their current level of hours. We then discuss in more detail movements between full-time and part- time work among older workers. In particular, we look at which kinds of individuals are more or less likely to move into part-time work between ages 50 and 69. Throughout, we define full-time work as working 30 or more hours per week, and part-time work as working fewer hours than that. The Institute for Fiscal Studies, June 2021
30 Changing patterns of work at older ages
Key findings
1 Part-time work is more prevalent among older workers than
younger workers, but the share of 50- to 69-year-olds in this
type of work has remained fairly stable over the past 30 years.
2 The proportion of older working women in part-time work has
decreased from 62% in 1992 to 53% in 2019, while there has
been a slight increase in the proportion of older working men in
part-time work (from 25% in 1992 to 27% in 2019).
3 Despite the higher prevalence of part-time work among older
workers, a significant minority of older workers, about 16%,
would like to work fewer hours, compared with 7% of older
workers who would like to work longer hours. In contrast, over
three-quarters of part-time workers are happy with their hours of
work.
4 The proportion of workers moving from full-time to part-time
work increases with age, and these transitions are particularly
common among workers in their 60s.
5 Transitions into part-time work are more common among older
workers with indicators of higher socio-economic status, such as
higher levels of education or living in less deprived areas.
6 These transitions are also more common among workers who
have less secure work arrangements, such as those who are
temporarily employed, are self-employed, earning less or have
shorter job tenures.
7 Part-time work plays an important part in retirement transitions;
of full-time workers who we first observe in 2002–03 and then
follow for 16 years, we find that 30% move from full-time to part-
time work during this period.
The Institute for Fiscal Studies, June 202131 Changing patterns of work at older ages
3.1 Older workers and part-time work
Most people in paid work work full-time and overall this remains true even of those
in paid work in their early 60s (though not at older ages). However, analysing the
patterns of part-time work is important for understanding the diversity of economic
activity that people in their 50s and 60s undertake. In this section, we document the
share of workers who work part-time, focusing again on people aged between 50
and 69.
Figure 3.1 shows the share of workers working fewer than 30 hours per week in
2017–19, by age and sex. Two things stand out. First, the share of part-time workers
is relatively stable at around 20% from the late 30s to the mid 50s, after which point
it starts to rise, with the largest increases at the ages of 65 and 66. By age 69, almost
70% of workers work part-time. Second, at all ages, a higher share of women work
part-time than men.
Figure 3.1. Share of workers who work fewer than 30 hours a week, by age and sex
(2017–19)
90
Percentage of workers who work part-time
80
70
60
50
40
30
20
10
0
20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68
Age
All Women Men
Note: Part-time workers are defined as those who work fewer than 30 hours in a normal
week.
Source: Labour Force Survey.
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